- The Full Federal Court in Australia has overturned findings that Block Earner operated an unlicensed managed investment scheme
- Judges ruled the company’s “Earner” product was not a financial product under the Corporations Act, as alleged by the Australian Securities and Investments Commission (ASIC)
- ASIC’s appeal was dismissed, and Block Earner’s cross-appeal was upheld, with all contraventions set aside
The Federal Court in Australia has ruled in favour of crypto fintech Block Earner, overturning previous findings that it operated an unlicensed managed investment scheme. The Full Court’s 22 April decision concludes a protracted legal battle initiated by the Australian Securities and Investments Commission (ASIC) over Block Earner’s “Earner” product — a fixed-yield crypto-lending service. The court has found that Block Earner’s activities did not constitute the provision of a “financial product” under the Corporations Act, a decision that reverses an earlier 2024 judgment that had declared the company in breach of licensing and registration requirements.
Crypto Lending Classification Dispute Led to Court
Block Earner offered a service where users could “lend” cryptocurrencies and receive fixed returns — 7% for USDC and 4% for other assets. The product ran from March to November 2022 and was central to ASIC’s claim that Block Earner was illegally operating a managed investment scheme and financial services business without the necessary licences.
ASIC initiated legal proceedings against Block Earner in November 2022, with the trial judge agreeing that the Earner product met the legal definitions of both a managed investment scheme and a financial investment facility. However, he declined to impose a penalty, citing the company’s honest conduct, professional legal advice, and lack of customer loss. The judge also criticized ASIC for releasing what was termed a “misleading media release” which did not reflect his findings.
Block Earner Appeal Pays Off
ASIC appealed the ruling on 17 June 2024, contesting the court’s relief of Block Earner from liability to pay a penalty, while Block Earner filed a cross-appeal on 9 July 2024, challenging the decision itself. Both appeals were heard by the Full Federal Court on 6 March 2025, with the judgment delivered on 22 April 2025.
In allowing the cross-appeal, Justices O’Callaghan, Abraham and Button stated that “[t]he contribution of money or money’s worth made by Block Earner’s customers was not in consideration for the acquisition of rights to benefits produced by the scheme.” The court emphasised that “the Loan Terms (not the first FAQ response) defined the relevant legal relationship” and found that customers were simply entitled to fixed interest, not to a share in Block Earner’s profits from its crypto-lending activities.
ASIC’s attempt to rely on representations in early marketing FAQs was dismissed as insufficient to override the express contractual terms, which stated: “you do not intend for Block Earner to use the loaned Eligible Cryptocurrency to generate a financial benefit or act as an investment for you.”
ASIC Considering its Options
In a press release, ASIC acknowledged the court’s finding but reiterated that “the case was pursued to provide clarity on the regulatory perimeter for crypto products.” ASIC Chair Joe Longo stated, “We will continue to take action where we see risks to investors from unlicensed conduct.”
This case is likely to influence how Australian regulators approach crypto yield products. While the judgment narrows the scope of what qualifies as a financial product, it also underscores the importance of precise legal drafting and disclosures in defining customer relationships.
As the court noted: “A loan agreement … is unlikely to satisfy the requirement that it was intended that the contribution would be used … to generate a financial return for the lender.” In the case of Block Earner, that distinction made all the difference.
